Excessive Financialization and Corporate Risk Vulnerability in Sudden Public Crises : From Stock Bubble Perspective

This paper examines the crowding-out effect of the sudden onset of COVID-19 on the share price bubbles of over-financialized firms, and identifies the mechanisms responsible for this effect. Our findings suggest that COVID-19 has a significant crowding-out effect on the share price bubbles of over-financialized firms, which can be attributed to its impact on both subjective investor sentiment and objective stock liquidity. Moreover, we have observed that this effect exhibits temporal, regional, and ownership heterogeneity. Our research provides an empirical reference that can be utilized to reduce the risk vulnerability of the virtual economy to sudden public health event shocks